Did Romney Violate Federal Ethics Law?

Mitt and Ann Romney may have earned between $15 million and $115 million from the auto bailout, but failing to report the windfall in his federal Candidate Disclosure Form may very well be a violation of the law.

Last week a formal complaint was filed with the Federal Office of Government Ethics by Citizens for Responsibility and Ethics in Washington (CREW), the United Auto Workers (UAW), along with other labor and nonpartisan watchdog groups.

In short, the allegations concern Delphi, a former General Motors subsidiary whose auto parts remain essential to GM’s production lines.

Back in 2009, Ann Romney partnered with Paul Singer to secretly purchase controlling interest in Delphi. [Bear in mind that billionaire Singer is one of Mitt Romney’s key campaign donors.] Elliot Management, Singer’s hedge fund, then threatened to cut off GM’s supply of steering columns and other key auto components unless GM, along with the government’s TARP auto bail-out fund provided them with large payments. The United States Treasury complained that this was “extortion”, but Delphi ultimately received $12.9 billion in taxpayer generated subsidies as no bailout of the auto industry could have worked without saving Delphi. Singer’s group then eliminated every UAW job in the company and then moved nearly its entire production operation to China and Mexico where Delphi now employes 25,000 auto parts workers at the expense of about that same number of jobs in the USA. [These allegations are particularly noteworthy considering the lies spread and later debunked by the auto industry itself, Detroit media the campaign misquoted, the Obama campaign and Pres. Bill Clinton. See Romney Called Out By Auto Industry, the Obama Campaign and Bill Clinton for Lying]

The resulting windfall for the Romneys means that shares Ann purchased for 67 cents are now worth over $30 for a 4 thousand percent gain earning the Romneys tens of millions of dollars. Additionally, one cannot forget billionaire Paul Singer who was identified by Forbes as one of Romney’s key campaign donors, Singer has given more than $1 million to the Romney SuperPAC known as Restore Our Future.

The UAW complaint calls for Romney to reveal exactly how much he made off Delphi — and continues to make.

At a press conference last week in Toledo, Bob King, President of the United Automobile Workers, announced that his union and Citizens for Responsibility and Ethics in Washington (CREW) have filed a formal complaint with the US Office of Government Ethics in Washington stating that Gov. Romney improperly hid a profit of $15.3 million to $115.0 million in Ann Romney’s so-called “blind” trust.

King went on to add: “The American people have a right to know about Gov. Romney’s potential conflicts of interest, such as the profits his family made from the auto rescue. It’s time for Gov. Romney to disclose or divest.”

“While Romney was opposing the rescue of one of the nation’s most important manufacturing sectors, he was building his fortunes with his Delphi investor group, making his fortunes off the misfortunes of others,” King added.

Don W. Fox
General Counsel and Principal Deputy Director
United States Office of Government Ethics
1201 New York Avenue, NW Washington, DC 20005

Dear Deputy Director Fox:

We are writing to provide you with further evidence of the pressing need to conduct the investigation we requested in our previous letter of August 23, 2012 into presidential candidate Mitt Romney’s financial disclosures, which do not appear to be in compliance with the Ethics in Government Act, 5 U.S.C. App. § 101 et seq. As we stressed in our initial letter, those disclosures lack information about the candidate’s stock holdings which the public has a right to know. As you are aware, the Act requires candidates for federal office to disclose their financial holdings so that the public can identify potential conflicts of interest and personal economic priorities of federal officials and candidates. While some officials use blind trusts to satisfy these disclosure requirements, Mitt Romney himself has said “The blind trust is an age-old ruse, if you will. Which is to say you can always tell a blind trust what it can and cannot do.” In any event, press reports indicate that Romney has not even attempted to meet the requirements for a federal blind trust with respect to his substantial equity holdings. The only way for this law to be enforced in a meaningful way is for your Office to act promptly to demand that candidate Romney disclose his stock holdings, or divest them if disclosure is not feasible.

Subsequent to our initial letter, news reports have provided further concrete information that candidate Romney’s undisclosed stock holdings do indeed create very serious conflicts of interest. For example, on October 17, 2012, The Nation Magazine reported that the Romney family personally profited at least $15.3 million from the auto bailout of 2009.1 Romney’s June 1, 2012 Public Financial Disclosure Report to your office did not reveal this windfall because he did not disclose the underlying holdings of his private equity and limited partnership funds. Romney disclosed instead only that, for example, he owned over a million dollars of a limited partnership called “Elliot Associates, L.P.” However, in violation of the Ethics in Government Act, Romney did not disclose the equities that were held in Elliot Associates.

News reports now reveal that Delphi is one of the underlying holdings of this limited partnership. Romney’s previously undisclosed ownership of Delphi stock evidently created a substantial conflict of interest. Hedge fund Elliott Associates, which acquired sizeable blocks of Delphi’s bonds at distressed prices, used debtor-in-possession financing to become Delphi’s largest stockholder. The company then leveraged its position as a critical supplier of General Motors to gain a substantial bailout from the US Treasury. Delphi reportedly threatened to shut down GM by withholding parts if its demands were not met. Mitt Romney, as a part owner of Delphi through his Elliott Associates’ limited partnership, gained directly from these actions, profiting anywhere from $15.3 million to over $115 million. Moreover, Delphi is not a small part of a diversified portfolio. Rather, Delphi represented an enormous portion of Elliott Management investments as reported in the business press.

It is further reported that Elliott Associates is also heavily invested in distressed sovereign debt, creating severe conflicts of interest and foreign policy implications for candidate Romney. Elliott is a “holdout creditor,” currently challenging the Republic of Argentina over its interest in defaulted government bonds. Reportedly, Argentina restructured 92% of its debt following its credit crisis of 2001, with creditors receiving approximately 30% of the debt’s original value. Elliott Associates has declined to accept this settlement, and instead is aggressively seeking repayment in full by pursuing Argentinian assets throughout the world. In an amicus brief to the Second Circuit, the United States Government stated Elliott Associates actions, if allowed to proceed, would have had a “significant, detrimental impact to our foreign relations, as well as on the reciprocal treatment of the United States and its extensive property holdings.”2 Recently, Elliott Associates seized an Argentine naval ship in West Africa as collateral for the debt.3 The fallout from the incident has now reached the United Nations.4 Mitt Romney thus stands to reap a substantial financial benefit if a company in which he has a large (but undisclosed) ownership interest continues to act in ways that the United States government has found is detrimental to the national interest. This is exactly the kind of conflict of interest that, at the least, requires the full disclosure required by the Ethics in Government Act.

These are hardly the only conflicts of interest buried in candidate Romney’s undisclosed financial holdings. Sensata Technologies, which Mitt Romney owns significant stock in through his investment in Bain Capital Fund VII, is currently laying off 270 employees in Freeport, Illinois and outsourcing those jobs to China. Mitt Romney, while at Bain Capital, also co-owned and managed Global-Tech, which helped Sunbeam Products outsource its appliance manufacturing plant in Coushatta, Louisiana, resulting in approximately 520 workers losing their job. Lack of disclosure leaves voters unable to identify and evaluate these conflicts of interest.

The evident purpose of the Ethics in Government Act is to make such conflicts of interest public. With the presidential election less than a week away, the Office of Government Ethics must act now to ensure Mitt Romney is in full compliance with the law’s disclosure requirements so that the public has the necessary information to evaluate candidate Romney’s position on matters in which he stands to benefit personally should his legislative agenda become law. Congress placed these obligations on Presidential candidates because it determined that such disclosure was vital to citizens’ evaluation of Presidential candidates. The Office of Governmental Ethics needs to act promptly to implement that legislative judgment.